- The U.S. Division of Labor issued a rule in January 2021 that
sought to make clear who’s, and who isn’t, an impartial contractor
for functions of the Truthful Labor Requirements Act.
- The Biden Administration sought to undo the rule when it got here
into workplace, however the rule was not too long ago reinstated.
- This Holland & Knight alert explains the rule concerning
impartial contractor standing.
On the finish of the Trump Administration in January 2021, the U.S.
Division of Labor (DOL) issued a rule that sought to make clear who
is, and who isn’t, an impartial contractor for functions of the
Truthful Labor Requirements Act (FLSA).1 The rule responded to
a long time of steadily diverging case legislation on the query throughout the
federal circuit courts. It surveyed the authorized panorama and
emphasised two components as notably probative: the putative
employer’s nature and diploma of management over the work, and the
particular person’s alternative for revenue or loss. The rule was
extensively considered favoring impartial contractor standing and was
to take impact on March 8, 2021.
Biden Administration Proposed Change
The Biden Administration sought to undo the rule when it got here
into workplace, however that may be tougher than it appears.
Usually, an administration can’t merely tear out an outdated rule
from the books. It should as a substitute carry out a wholly new rulemaking,
with a proposed rule to delay or take away the outdated rule, await and
overview public remark after which subject a closing rule that removes the
The Biden Administration took the next actions to take away
the Trump Administration’s impartial contractor rule:
- On Feb. 5, 2021, it issued a proposed rule to delay the Trump
rule’s efficient date.2
- On March 8, 2021, it issued a closing rule delaying the Trump
rule’s efficient date till Could 7, 2021.3
- On March 12, 2021, it issued a proposed rule to withdraw the
- On Could 6, 2021 (sooner or later earlier than the delay would expire), it
issued a closing rule withdrawing the Trump rule.5
Lately, nevertheless, these actions had been vacated, and the Trump
Administration’s rule was reinstated. On March 14, 2022, Decide
Marcia Crone of the U.S. District Courtroom of the Jap District of
Texas6 held that the Biden Administration’s delay
and withdrawal guidelines suffered from a wide range of procedural authorized
defects. So the courtroom vacated these guidelines.
What Does That Imply?
First, the courtroom held that the Trump impartial contractor rule
“grew to become efficient as of March 8, 2021, the rule’s authentic
efficient date, and stays in impact.” In order of at the moment, and so
far because the decide’s ruling extends, the Trump
Administration’s rule stays in impact for the needs of
figuring out impartial contractor standing.7
Second, employers ought to proceed to look at the DOL intently for
any indications as to the way it interprets the ruling. Though the
ruling purports to vacate the delay and withdrawal guidelines, there may be
a long-running authorized debate as as to whether such vacatur orders from
decrease courts do or ought to use nationwide versus solely the
courtroom jurisdiction or to the plaintiffs concerned. So it’s doable
that the DOL might file a movement for clarification with the courtroom
or provide a public assertion that competes with what seems to be a
nationwide vacatur of the rule.
Third, the DOL will nearly definitely take new steps rapidly to
accomplish its aim of trying to withdraw the Trump impartial
contractor rule. What’s much less clear is whether or not it’s going to attempt to take action
by interesting the Texas case, issuing a brand new proposed withdrawal rule
or each. A standard observe for businesses on this state of affairs,
together with the DOL prior to now, is to enchantment the adversarial ruling
whereas concurrently enterprise a brand new rulemaking in the course of the
pendency of that enchantment. Generally the company asks, and sometimes
the courtroom will agree, to remain the enchantment whereas the brand new rule is
proposed and finalized.
Fourth, the delay and withdrawal guidelines might be characterised as
regulatory “protection” – repealing earlier insurance policies
not according to the brand new administration’s. It isn’t identified
whether or not the present DOL has any regulatory “offense” in
retailer for impartial contractor standing. But when it does, it might be
extra economical for the DOL at this level to mix each into one
rule – a repeal-and-replace technique, slightly than
1. See Unbiased Contractor Standing Beneath the Truthful Labor
Requirements Act, 86 Fed. Reg. 1168 (Jan. 7, 2021), codified in
principal half at 29 C.F.R. §§
2. See Unbiased Contractor Standing Beneath the Truthful Labor
Requirements Act: Delay of Efficient Date, 86 Fed. Reg. 8,326 (Feb. 5,
3. See Unbiased Contractor Standing Beneath the Truthful Labor
Requirements Act (FLSA): Delay of Efficient Date, 86 Fed. Reg. 12,535
(March 4, 2021).
4. See Unbiased Contractor Standing Beneath the Truthful Labor
Requirements Act; Withdrawal, 86 Fed. Reg. 14,027 (March 12,
5. See Unbiased Contractor Standing Beneath the Truthful Labor
Requirements Act (FLSA): Withdrawal, 86 Fed. Reg. 24,303 (Could 6,
6. This isn’t Decide Crone’s first U.S. Division of
Labor (DOL) rule problem. She additionally heard the problem to the
DOL’s 2016 Truthful Pay and Protected Workplaces Rule, additionally referred to as the
“blacklisting rule.” Holland & Knight not too long ago
coated how the blacklisting rule could also be making a comeback. (See
alert, “USDA Proposes Contractor
Blacklisting Rule for Its Contractors: One-Off or the First
Domino?,” March 18, 2022.)
7. See 29 C.F.R. § 795.100.
The content material of this text is meant to offer a common
information to the subject material. Specialist recommendation must be sought
about your particular circumstances.